Simplified Transaction Clearance for Strategically Important Infectant or Water Supply/Disposal Companies


Legal Update No 841

Bryan Cave Leighton Paisner (Russia) LLP, formerly Goltsblat BLP in Russia, advises that Federal Law No. 40-FZ dated 9 March 2021 “Amending the Federal Law “Foreign Investment in Companies of Strategic Importance for National Defence and Security” (the “Law”) has come into force.

The new version regulates transactions made by foreign investors separately if they trigger take-overs of strategically important companies (SICs) working with infectants and/or engaged in water supply and waste water disposal.

There is now a simplified procedure for considering clearance applications for this type of transaction provided the following SIC criteria are met simultaneously: the SIC

  • to be taken over is considered strategically important only in as far as it works with infectants (other than for medicament production) and/or provides water and waste water services via centralised or public utility infrastructure systems;

  • is not engaged in these operations as its core business;

  • had reported three years of book value of assets used in those operations at no more than 1% of the book value of its assets for each of the closed reporting years before it applied for pre-clearance.

This procedure, however, does not apply to transactions made by non-disclosing foreign investors and/or by foreign states and/or international organisations and/or parties they control.

Even so, the Law makes one exception: SICs working with infectants (other than for medicament production) and/or engaged in water supply and waste water disposal and meeting the above criteria may still be taken over by a company controlled by a foreign state and the relevant transaction may still be made if it is cleared by the Government Commission for Control over Foreign Investment (the “Commission”).

The antitrust authority will choose to clear a transaction on a simplified basis if, apart from the SIC criteria being met, it also receives opinions from Rospotrebandzor1, the Russian Construction2, Economic Development and Defence Ministries and the Russian Federal Security Service that there is no need for the Commission to consider the application and that it poses no threat to national defence or security.   In this case, the transaction (take-over) may be cleared by the Russian FAS itself subject to the Commission being notified.

If any of these authorities does not present an opinion or if any such opinion states that the above threat has emerged or the application needs to be considered by the Commission, the simplified procedure will not be used and the application will be referred to the Commission for consideration in the usual way.

The list of potential applicant obligations has also been extended, especially the following ones partially relating to operations triggering the simplified procedure:

  • transferring to another party rights to engage in water supply and waste water disposal and/or operations involving infectants and/or rights to assets required for this in compliance with Law No. 57-FZ3; or to state or municipal ownership, within the time set by the Commission;

  • the SIC continuing to engage in strategically important operations;

  • ensuring that the SIC’s production and supply volumes are maintained at least at the level of those prior to the transaction or take-over date;

  • an SIC engaged in hot and cold water supply and/or waste water disposal continuing to roll out the investment programme approved by the competent executive authority of a Russian region or by a local government;

  • adopting innovative technologies at industrial sites in Russia and having plants and factories built on Russian territory for making parts, components and materials used by the SIC for product manufacture and supply purposes.

1 for operations involving infectants (other than for medicament production)

2 for water supply and waste water disposal via centralised and public utility infrastructure systems

3 Federal Law No. 57-FZ dated 29 April 2008 “Foreign Investment in Companies of Strategic Importance for National Defence and Security”

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